Kupski v. Bal Inv. Co., Docket No. 9568

• Decision Date: 30 August 1971
• Docket Number: Docket No. 9568,No. 1,1
• Citation: 192 N.W.2d 519,35 Mich.App. 680
• Parties: Gregory J. KUPSKI, Jr. and Mary Ann Kupski, Plaintiffs-Appellants, v. BAL INVESTMENT COMPANY, a Michigan corporation, Defendant-Appellee
• Court: Court of Appeal of Michigan — District of US

Page 519

192 N.W.2d 519

35 Mich.App. 680

Gregory J. KUPSKI, Jr. and Mary Ann Kupski, Plaintiffs-Appellants, v. BAL INVESTMENT COMPANY, a Michigan corporation, Defendant-Appellee.

Docket No. 9568.

Court of Appeals of Michigan, Division No. 1.

Aug. 30, 1971.

Leave to Appeal Denied Nov. 16, 1971.

Released for Publication Jan. 3, 1972.

Frank K. Penirian, Jr., Miller & Penirian, Detroit, for plaintiffs-appellants.

Donald M. Cutler, Southfield, for defendant-appellee.

Before T. M. BURNS, P.J., and HOLBROOK and McGREGOR, JJ.

McGREGOR, Judge.

On March 4, 1969, Avco Security Corporation sold, assigned and transferred, for a valuable consideration, a mortgage to the defendant, which covered the vendee's interest in a land contract dated October 17, 1966, made by plaintiffs to Budman's Inc.

Defendant did not file its 1965 Annual Report and fees, which were due on May 15, 1965, in consequence of which its charter was suspended on May 25, 1965, ¹ and became void on May 15, 1967. ² On August 11, 1969, the defendant filed its annual report and paid the fees, and its charter was reinstated on that date. ³

On April 10, 1969, while its charter was void, the defendant instituted statutory foreclosure proceedings, pursuant to a power of sale contained in the above mentioned mortgage. Plaintiffs here were defendants in the statutory foreclosure proceedings. Foreclosure was had in July, 1969, and the six-month redemption period expired in January, 1970.

On February 13, 1970, defendant filed a complaint to recover possession in the common pleas court, landlord-tenant division, naming the plaintiffs herein as defendants.

Through their attorney, plaintiffs filed a verified complaint against the defendant, on February 25, 1970. The trial court granted plaintiffs a temporary restraining order and order to show cause.

On March 13, 1970, plaintiffs filed an amended complaint, alleging the defendant's corporate powers had been suspended prior to March 4, 1969, the date of the assignment. They further alleged that the foreclosure and sheriff's deed issued pursuant thereto were null and void and should be set aside. The court was requested to enter its order restraining the defendant from proceeding any further in its common pleas action to recover possession. A further prayer requested that defendant be made to show cause why the restraining order should not be made into a preliminary injunction.

Plaintiffs' motion for preliminary injunction was denied on March 13, 1970; subsequently, plaintiffs filed a motion to reconsider the order to show cause for preliminary injunction on March 16, 1970.

On April 14, 1970, the court filed its opinion, denying plaintiffs' motion to reconsider; on May 15, 1970, the court entered an order of dismissal, pursuant to its opinion of April 14, 1970.

On appeal, defendant contends that the assignment of the mortgage to it was a valid contract, even though entered into when its charter was void. It further contends that it may affirmatively enforce that contract against plaintiffs while its charter remained void. The applicable provisions of the Michigan Corporation Act are as follows:

Default in filing reports or paying fees; effect on powers, liability of officers. 'Sec. 87. * * * (1) If any corporation neglects or refuses to make and file the reports and/or pay any fees required by this act within the time herein specified and shall continue in default for ten (10) days thereafter, unless the secretary of state shall for good cause shown extend the time for the filing of such report or the payment of such fee, as the case may be, as provided in section 91 of this act, and (2) if such corporation shall continue in default for 10 days after the expiration of such suspension, Its corporate powers shall be suspended thereafter, until it shall file such report, and it shall not maintain any action or suit in any court of this state upon any contract entered into during the time of such default; but nothing herein contained shall prevent the enforcement of such contract against the corporation by the other party thereto, and during the period of such suspension such corporation may exercise the power of disposing of any conveying its property and may settle and close its business. Any officer or officers of such corporation so in default who has neglected or refused to join in making of such report and/or pay such fee shall be liable for all debts of such corporation contracted during the period of such neglect or refusal.' (C.L.1948, § 450.87) (Emphasis added.) M.C.L.A. § 450.87 (Stat.Ann.1963 Rev. § 21.87).

'If any profit corporation which has heretofore been, is now or may hereafter be required to file its annual report with and pay a privilege fee to the secretary of state, shall for 2 consecutive years neglect or refuse to file such report and/or to pay such fee, the charter of such corporation shall be absolutely void, without any judicial proceedings whatsoever, and such corporation shall be wound up in any manner provided by this act unless the secretary of state shall for good cause shown extend the time for the filing of such report or the payment of such fee as the case may be. In case of extension of time as provided in this section the secretary of state shall file in his office a certificate showing the length of time granted by such extension: Provided, That in no case shall the total extension of time granted be more than 1 year: And provided further, That such extension of time shall be granted prior to the expiration of the time fixed in section 82 of this act. The provisions of this act are hereby declared to be self-executing.' (C.L. '48 § 450.91). M.C.L.A. § 450.91 (Stat.Ann.1963 Rev. § 21.91).

In Adams v. Edward M. Burke Homes, Inc. (1968), 14 Mich.App. 578, 591, 592, 166 N.W.2d 34, 40, Judge Levin, in a concurring opinion, stated:

'The law in Michigan is that a contract entered into by a corporation during a period in which it is delinquent in filing annual reports is so far invalid that the provisions of the contract may not affirmatively be relied upon by the delinquent corporation. Detroit...